TMI Blog2018 (11) TMI 628X X X X Extracts X X X X X X X X Extracts X X X X ..... Hospital authorities, raising of invoices by the supplier on the hospital authorities, delivery/supply/installation at the hospital premises and payment by cheque by the assessee equivalent to the invoice value directly to the suppliers. However, we find that there is nothing on record in terms of verifiable evidence/documentation in support of aforesaid contentions so raised by the AR. Further, we find that there is no finding recorded by the AO or the CIT(A) examining the aforesaid contentions so raised by the AR. In absence of the same, we are unable to take a view in the matter and the matter deserves to be set-aside. Addition u/s.40(a)(ia) - certificate of accountants furnished by the assessee have not been furnished in accordance with rule 31ACB as amended w.e.f. 19.02.2013 in relation to interest payment made by it to a Non-Banking Finance Company namely S.E. Investment Ltd without deduction of tax at source - Held that:- As we have already set-aside the matter relation to deduction u/s 80G, in the interest of justice, this matter is also set-aside to the file of the AO to examine the same afresh after providing reasonable opportunity to the assessee. In the result, the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act amounting to ₹ 1,27,67,676/-. Briefly, the facts of the case are that during the course of assessment proceedings, the Assessing Officer observed that on perusal of details, it is noticed that the donation has been made otherwise by way of money which is not allowable as per provisions of Section 80G(5D) of the Act. The Assessing Officer thereafter referred to the Explanation 5 to Section 80G wherein it is stated that no deduction shall be allowed under this section in respect of any donation unless such donation is a sum of money. The AO thereafter referred to the decision of Hon ble Rajasthan High Court and held that the department has not accepted the finding of the Hon ble Rajasthan High Court and has filed an S.L.P. before the Hon ble Supreme Court hence, the matter has not achieved finality. Accordingly, the deduction claimed U/s 80G of the Act amounting to ₹ 1,27,67,676/- was disallowed being the donation made in kind and not in cash as per Explanation 5 to Section 80G of the Act. 3. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A). The ld. CIT(A) referring to the decision of the Coordinate Bench and the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held not eligible for deduction U/s 80G r.w. Explanation-5 of the Act. Accordingly, the ld. CIT(A) upheld the deduction so made by the Assessing Officer. Now, the assessee is in appeal before us. 4. In his submission, the ld. AR heavily relied on the decision of the Co-ordinate Bench in assessee s own case for AY 2009-10 and submitted that the matter is squarely covered by the said decision of the Co-ordinate Bench which has been affirmed by the Hon ble Rajasthan High Court, and which has been followed by the Coordinate Bench subsequently in AY 2012-13. Further, the ld. AR has referred to the written submissions which are reproduced as under:- 1. That the observations of the learned CIT(A) that the donation given is otherwise than by way of money is not correct. The factual position is that on the request of M/s Rajasthan Medicare Relief Society, S.M.S. Hospital, Jaipur as well as SPMCHI, Jaipur, the cheques were issued in favour of supplier of medical equipments, who directly supplied and installed the equipments in both the hospitals. To support its claim that donation given by it is in money and not in kind, the assessee company submitted certificate issued by hosp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uipments were directly sent by the manufacturers to the above mentioned Hospitals and the same were installed at the Hospitals with the prior consent of the Hospital authorities and the medical equipments and machineries were installed in the hospital to provide medical assistance to the poor people. 5. That the AO failed to note that in this case on the advice of the hospital authorities the money was sent directly by the assessee to the manufacturers of the medical equipments and machineries for and on behalf of both the Hospitals and there was a due confirmation by hospital authorities in regard to medical equipments and machineries being installed at the above mentioned Hospitals and amount having been paid by account payee cheque by the assessee to the manufacturers. It is further submitted that the AO should have appreciated that after installation of the machines in Hospitals there was a counter check by the government authorities i.e. medical superintendent etc. 6. That the AO failed to take into consideration the fact that so far as assessee is concerned, he has paid the amount of donation by way of account payee cheque issued to the manufacturers on the directio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 014, relying on judgments in case of CIT Vs. Associated Cement Company Ltd., 68 ITR 478 (Bombay) and CIT Vs. Bangalore Woollen Cotton Silk Mills, 91 ITR 166 (Mysore), held that the transaction in substance is a money transaction and the donation is virtually a donation of sum of money and assessee is entitled to deduction u/s.80G of the I.T. Act. As mentioned above appeal by the department against the ITAT order has been dismissed by the Rajasthan High Court. It is, therefore, prayed that the deduction u/s.80G may therefore be allowed to the assessee and disallowance made be deleted. The assessee had made payments by cheques to the suppliers of equipments on behalf of donee which tantamount to donations made in a sum of money. 8. That the humble appellant also craves leave to a recent judgment dated 15.11.2017 of ITAT, Jaipur in I.T.A.N0.1069/JP/2016 for assessment year 2012-13 in assessee's own case wherein the Hon'ble Tribunal held as under: We also note that this issue is fully covered by the assessee's own case decided by the Jaipur ITAT Bench, in ITA NO.298/JP/2014 A.Y. 2009-10 wherein it was held that transaction in substance is money transaction and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT Vs. Smt. Dhirja Ben R. Amin 141 ITR 875 where the donation was of shares, the Hon'ble Court held that since donation is in kind deduction under section 80G is not available. However, in this decision, Hon'ble Gujarat High Court after referring to the decision of Bombay High Court in case CIT Vs. Associated Cement Co. Ltd. 68 ITR 478, Mysore High Court in case of CIT Vs. Bangalore Woollen, Cotton Silk Mills Co. 91 ITR 166, Andhra Pradesh High Court in case of CIT Vs. Amonbolu Rajiah 102 ITR 403, Bombay High Court in case of CIT Vs. Khandelwal Laboratory Pvt. Ltd. 118 ITR 531 and Gujarat High Court in case of Saurashtra Cement and Chemical Industries Ltd. Vs. CIT 123 ITR 669 held in para 17 as under: The consensus of judicial opinion is that the substance of the donation should be looked into and if it is found that in substance it is a donation in cash, the benefit of section 80G should be extended to the assessee . From reading of the entire judgment it can be seen that if the substance of a transaction is a money transaction, deduction u/s.80G is allowable. However, since in the case before the High Court, the donation was of shares and there was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently, Commissioner of Income tax by taking action u/s.263 of the Income tax Act took a contrary view and disallowed the assessee's claim of deduction u/s.80G. Against this disallowance of deduction u/s.80G by the learned CIT assessee preferred an appeal before the Income Tax Appellate Tribunal which by order dated 5th Nov., 2014 allowed the claim of the assessee u/s.80G of I.T. Act by holding that the order passed by Commissioner of Income tax u/s.263 is not valid in law. Against this judgment of Hon'ble ITAT, Income tax department filed appeal before the Hon'ble Rajasthan High Court. The appeal number was DB Income tax Appeal No.54/2015. The appeal of the department was dismissed by the Hon'ble High Court and the order allowing the deduction u/s.80G by the learned ITAT was sustained by the Hon'ble High Court vide its judgment dated 11.8.2015. 14. Recently the assessee s case for assessment year 2013-14 i.e. year under appeal was selected for scrutiny under CASS and assessment proceedings were started. In the course of assessment proceedings the AO raised the issue of deduction u/s.80G of the I.T. Act in regard to donation made by appellant company otherwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's own case for the assessment year 2009-10 was similar to the issue involved in assessment for assessment year 2013-14. In this regard it is respectfully submitted that when the AO himself has confirmed that the issue of deduction u/s.80G of the I.T. Act involved in AY 2013- 14 is similar to the issue of deduction u/s.80G of the I.T. Act involved in assessment year 2009-10 in assessee's own case, the assessing officer i.e. the Dy. Commissioner of Income tax, Circle II, Jaipur as well as learned Commissioner (Appeals) were, in view of judicial discipline and doctrine of precedent, duty bound to follow in toto the judgment dated 11th August 2015 passed by the Hon'ble Rajasthan High Court. (c) That it is respectfully submitted that it is a settled principle of law that mere filing of appeal against the judgment passed by the High Court and in this case the jurisdictional high court cannot reduce the precedential value of the judgment of the Hon'ble High Court. (d) That the assessee understands that no stay order has been passed by the Hon'ble Supreme Court in regard to above said S.L.P. and it is submitted that in the absence of any stay order passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nations in kind. Donations may be made by supplying goods of various kinds including building, vehicle or any other tangible property but such donations, though convertible in terms of money, do not fall within the scope of section 80G(2)(a) entitling an assessee to deduction. Donation of shares of a company does not amount to payment of any sum or amount though the shares, on their sale, may be converted into money. But the donation so made does not fall within the ambit of the aforesaid section. Since the expression and language used in section 80G(2)(a) is plain and clear, it is not open to the courts to enlarge the scope by its interpretative process founded on the basis of the object and purpose underlying the provisions for granting relief to an assessee. 5. There has been a conflict of opinion between the various High Courts on the interpretation of section 80G(2)(a). In CIT v. Associated Cement Co. Ltd. [1968] 68 ITR 478 (Bom.); Addl. CIT v. Abhai Maligai [1978] 113 ITR 737 (Mad.) and Cir v. Bangalore Woollen, Cotton Silk Mills Co. Ltd. [1973] 91 ITR 166 (Mys.), courts have taken the view that while, interpreting section 80G(2)(a), the substance of the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash donation and donation in kind. In both the cases, there is outflow of money from the assessee s hand. However, there could be various scenarios in particular facts and circumstances of each case. In one sceanrio, the money is going directly from the assessee to the donee which doesn t create any confusion and it will be clearly eligible for deduction. In another scenario, where the assessee has an existing asset/property/stock-in-trade in its possession/control and the same is thereafter transferred by way of donation, it will be a clear case of donation in kind and the same will not be eligible for deduction. There could be a third scenario where the assessee purchases any asset/property/equipments etc from a third party and thereafter, the same is donated. In this case, even though the money has been spent by the assessee in purchasing the asset/property/equipment, what has been actually donated is the asset/property/equipment. The act of donation is subsequent to purchase/acquisition by the assessee in its own right. Once the assessee has purchased/acquired the asset/property/equipment, the title/ownership in such asset/property/equipment has been transferred by way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... livered to the hospital authorities and also got installed in the hospital premises. It was submitted that at no stage, equipments are delivered to the assessee company. Moreover after having made the payments by way of cheques to the suppliers, the assessee has no connection with the suppliers. It was submitted that all works including placing of order of medical equipments required by hospital authorities, taking of delivery of goods, checking of quality and quantity of the medical equipments and getting installed these medical equipments in the hospitals are under direct supervision of the medical superintendent and at no stage assessee comes into picture nor it has any say in the supply of the equipments and installation thereof. It was submitted that so far as assessee is concerned, it has paid the donation in money i.e. by way of issuing cheque from his bank account in favour of suppliers of medical equipments and in such a situation by no canon of law, can it be said that donation is in kind or nor in cash. The above contentions of the ld AR need to be tested in terms of actual verifiable documentation right from placing the order by the Hospital authorities, raising of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on ble Supreme Court in case of H.H. Sri Rama Verma (supra) referred supra, we set-aside the matter to the file of the AO to examine the same afresh taking into consideration the above discussions, after providing reasonable opportunity to the assessee. 13. In the result, the ground is allowed for statistical purposes. 14. In ground No. 4 the assessee has submitted that this ground of appeal is in regard to sustenance by learned Commissioner (Appeals) of disallowance and consequential addition u/s.40(a)(ia) of the I.T. Act made by the AO on the ground that the certificate of accountants furnished by the assessee have not been furnished in accordance with rule 31ACB as amended w.e.f. 19.02.2013 in relation to interest payment of ₹ 36,00,008/- made by it to a Non-Banking Finance Company namely S.E. Investment Ltd at ₹ 36,00,008/- without deduction of tax at source. 15. It was submitted that the facts leading to above disallowances and consequential addition are that the assessee company is engaged in the business of manufacturing and export of readymade garments. It took unsecured loan from S.E. Investment Ltd., an NBFC. However TDS was not deducted on interest p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es a certificate to this effect from an accountant in such form as may be prescribed Therefore, if the resident payee satisfies all the above 3 conditions and the deductor furnishes a certificate to this effect from a chartered accountant in such form as may be prescribed, then the deductor will be allowed the deduction of the expenses mentioned in 40(a)(ia) by assuming that the deductor has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee aforesaid. 18. It was submitted that the learned AO ought to have appreciated that after the amendment in section 201 of the I.T. Act by way of insertion of proviso to section 201(1) of the I.T. Act, 1961 by Finance Act 2012 (w.e.f. 01.07.2012) payment of interest made to NBFCs without deduction of tax at source is an allowable expenditure [of course it is subject to some statutory compliances which included filing of certificate from Chartered Accountant] and not hit by the mischief of the provisions of section 40(a)(ia) of the I.T. Act. 19. It was submitted that the assessee understands that the NBFC, namely, S.E. Investment Ltd has furnished its return of income u/s.139 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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